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U.S.-Vietnam Economic and Trade Relations:
Issues for the 112th Congress
Michael F. Martin
Specialist in Asian Affairs
December 27, 2010
Congressional Research Service
7-5700
www.crs.gov
R41550
CRS Report for Congress
P
repared for Members and Committees of Congress
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
Summary
Since the resumption of trade relations in the 1990s, Vietnam has rapidly risen to become a
significant trading partner for the United States. Along with the growth of bilateral trade, a
number of issues of common concerns, and sometimes disagreement, have emerged between the
two nations. Congress may play a direct role in the U.S. policy on some of these issues.
Bilateral trade has grown from about $220 million in 1994 to $15.4 billion in 2009. Vietnam is
the second-largest source of U.S. clothing imports, and a major source for footwear, furniture, and
electrical machinery. Much of this rapid growth in bilateral trade can be attributed to U.S.
extension of normal trade relations (NTR) status to Vietnam. Another major contributing factor is
over 20 years of rapid economic growth in Vietnam, ushered in by a 1986 shift to a more market-
oriented economic system.
Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic
Economic Partnership Agreement (TPP). The United States and Vietnam are among the nine
countries negotiating the terms of expansion of the trade association. The Obama Administration
envisions an expanded TPP as a “21st Century free trade agreement” that will become the
cornerstone for a trans-Pacific regional trade association. Vietnam is also a party to negotiations
to form a larger pan-Asian regional trade association based on the Association of Southeast Asian
Nations (ASEAN) that could exclude the United States and prove to be an alternative to the TPP
and the U.S. vision for regional economic integration in Asia.
The growth in bilateral trade has not been without its accompanying issues and problems.
Vietnam has applied for acceptance into the U.S. Generalized System of Preferences (GSP)
program and is participating in negotiations of a Bilateral Investment Treaty (BIT) with the
United States. Vietnam also would like to have the United States officially recognize it as a
market economy.
There have also been problems with U.S. imports of specific products from Vietnam. In 2003, the
United States began collecting antidumping duties on certain fish imports from Vietnam. In 2008,
the 110th Congress passed legislation that transferred the regulation of catfish from the Food and
Drug Administration to the U.S. Department of Agriculture. The Vietnamese government strongly
protested these actions as largely protectionist measures. However, the proposed new catfish
regulations have been under review by the White House for over a year.
An examination of recent trends in bilateral trade reveals that other product categories—such as
footwear, furniture, and electrical machinery—could generate future tension between the United
States and Vietnam. Observers of Vietnam’s economic development have also been critical of
Vietnam’s protection of workers’ rights, its enforcement of intellectual property rights laws and
regulations, and the country’s exchange rate policies.
The 112th Congress may play an important role in one or more of these issues, as have past
Congresses. The 112th Congress would have to consider implementing legislation if a TPP
agreement is concluded. If the 112th Congress should take up GSP renewal, it may also consider
Vietnam’s pending application. The 112th Congress may also weigh in on its designation as a
market or non-market economy. Finally, if current growth trends continue, Congress may be
asked to act on the rising amount of footwear, furniture, and/or electrical machinery being
imported from Vietnam. This report will be updated as circumstances require.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
Contents
Introduction ................................................................................................................................ 1
Trans-Pacific Strategic Economic Partnership Agreement (TPP).................................................. 3
Vietnam’s Generalized System of Preferences (GSP) Application................................................ 4
Compliance with Eligibility Criteria ...................................................................................... 5
Is Vietnam a “Communist” Country?............................................................................... 5
Workers’ Rights .............................................................................................................. 6
IPR Protection................................................................................................................. 6
Congressional Implications ................................................................................................... 7
Bilateral Investment Treaty (BIT) Negotiations ........................................................................... 7
Status of the Negotiations...................................................................................................... 8
The Role of Congress............................................................................................................ 9
Non-Market Economy Designation ............................................................................................. 9
State-Owned Enterprises ....................................................................................................... 9
Price and Wage Controls ..................................................................................................... 10
Vietnam’s View................................................................................................................... 11
Catfish ...................................................................................................................................... 11
2008 Farm Bill.................................................................................................................... 12
The Antidumping Sunset Review ........................................................................................ 13
Implications for the 112th Congress ..................................................................................... 14
Other Economic Issues.............................................................................................................. 14
U.S. Clothing Imports from Vietnam ................................................................................... 14
Workers’ Rights .................................................................................................................. 15
IPR Protection..................................................................................................................... 17
Vietnam’s Exchange Rate Policy ......................................................................................... 17
Key Trends in Bilateral Trade.................................................................................................... 17
Merchandise Trade.............................................................................................................. 18
Furniture and Bedding................................................................................................... 19
Footwear....................................................................................................................... 19
Electrical Machinery ..................................................................................................... 19
Product Interplay........................................................................................................... 19
Trade in Services................................................................................................................. 19
Foreign Direct Investment ................................................................................................... 20
Figures
Figure 1. U.S. Clothing Imports from Vietnam .......................................................................... 15
Tables
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam................... 2
Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam.......................................... 18
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Contacts
Author Contact Information ...................................................................................................... 20
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
Introduction
For over 20 years, economic and trade relations between the United States and the Socialist
Republic of Vietnam (Vietnam) remained virtually frozen, in part a legacy of the extended
military conflict of the 1960s and 1970s. On May 2, 1975, after North Vietnam defeated U.S. ally
South Vietnam, President Gerald R. Ford extended President Richard M. Nixon’s 1964 trade
embargo on North Vietnam to cover the reunified nation.1 Under the Ford embargo, bilateral trade
and financial transactions were prohibited.
Economic and trade relations between the two nations began to thaw during the Clinton
Administration, building on joint efforts during the Reagan and George H. W. Bush
Administrations to resolve a sensitive issue in the United States—recovering the remains of U.S.
military personnel declared “missing in action” (MIA) during the Vietnam War.2 The shift in U.S.
policy also was spurred by Vietnam’s withdrawal from Cambodia. President Bill Clinton ordered
an end to the U.S. trade embargo on Vietnam on February 3, 1994.3 In 1997, President Clinton
appointed the first U.S. ambassador to Vietnam since the end of the Vietnam War.
Bilateral relations also improved, in part, due to Vietnam’s 1986 decision to shift from a Soviet-
style central planned economy to a form of market socialism. The new economic policy, known
as Doi Moi (“change and newness”), ushered in a period of over 20 years of rapid growth in
Vietnam. Since 1995, Vietnam’s real GDP growth has averaged over 7% per year, second only to
China. Much of that growth has been generated by foreign investments in Vietnam’s
manufacturing sector, particularly its clothing industry.
The United States and Vietnam signed a bilateral trade agreement (BTA) on July 13, 2000, which
went into force on December 10, 2001.4 As part of the BTA, the United States extended to
Vietnam conditional most favored nation (MFN) trade status, now known as normal trade
relations (NTR). Economic and trade relations further improved when the United States granted
Vietnam permanent normal trade relations (PNTR) status on December 29, 2006, as part of
Vietnam’s accession to the World Trade Organization (WTO).5 Over the last three years, the
United States government has appropriated approximately $10 million each year to support
Vietnam’s economic reforms.6 In addition, the two nations have set up a ministerial-level Trade
1 Office of Foreign Assets Control, Department of Treasury, “Foreign Assets Control Regulations,” 40 Federal
Register 19202-3, May 2, 1975. For more information on the history of U.S. trade sanctions on North Vietnam and the
Socialist Republic of Vietnam, see CRS Report 94-633, Vietnam: Procedural and Jurisdictional Questions Regarding
Possible Normalization of U.S. Diplomatic and Economic Relations, by Vladimir N. Pregelj et. al.
2 For more information about the thaw in U.S.-Vietnam relations, see CRS Report R40208, U.S.-Vietnam Relations in
2010: Current Issues and Implications for U.S. Policy, by Mark E. Manyin.
3 The action came after many months of high-level U.S. interaction with Vietnam in resolving MIA cases and a January
27, 1994 vote in the Senate urging that the embargo be lifted, language that was attached to broad authorizing
legislation (H.R. 2333). The language was controversial in the House, but H.R. 2333 passed Congress; it was signed
into law (P.L. 103-236) on April 30, 1994.
4 For more information about the BTA, see CRS Report RL30416, The Vietnam-U.S. Bilateral Trade Agreement, by
Mark E. Manyin.
5 CRS Report RL33490, Vietnam PNTR Status and WTO Accession: Issues and Implications for the United States, by
Mark E. Manyin, William H. Cooper, and Bernard A. Gelb.
6 USAID correspondence with CRS in December 2010.
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and Investment Agreement (TIFA) Council to discuss issues related to the implementation of the
BIT and WTO agreements, as well as trade and investment policies in general.
In contrast to some other nations (for example, China), official U.S. and Vietnamese trade data
are comparatively close and reflect a similar pattern in the growth of bilateral trade (see Table 1).
For the first few years following the end of the U.S. embargo, trade between the two nations grew
slowly, principally because of Vietnam’s lack of NTR. However, following the granting of
conditional NTR in December 2001, trade flows between the United States and Vietnam grew
quickly. Merchandise trade nearly doubled between 2001 and 2002, regardless of which nation’s
figures one uses. Bilateral trade jumped again in 2007, following the United States granting
PNTR status to Vietnam. Total trade declined slightly in 2009 as U.S. imports from Vietnam slid
4.7% because of the economic recession. U.S. exports to Vietnam increased by 11.4% in 2009.
Table 1. Growth in Bilateral Merchandise Trade between United States and Vietnam
(in millions of U.S. dollars)
U.S. Trade Data
Vietnamese Data
Exports to
Imports from
Exports to
Imports from
Year
Vietnam
Vietnam
United States
United States
1994 173
50 N.A. N.A.
1995
253 199 170 130
1996
616 319 204 246
1997
278 388 287 252
1998
274 553 469 325
1999
291 609 504 323
2000
368 822 733 363
2001 461 1,053 1,065 411
2002 580 2,395 2,453 458
2003
1,324 4,555 3,939 1,143
2004
1,163 5,276 5,025 1,134
2005 1,192 6,630 5,924
863
2006 1,100 8,566 7,845
987
2007 1,903 10,633 10,105 1,701
2008 2,790 12,901 11,869 2,635
2009 3,108 12,290 11,356 3,009
Source: U.S. data from International Trade Commission; Vietnamese data from General Statistics Office of
Vietnam.
Note: U.S. data valued at F.A.S. and Customs Value; Vietnam data valued at F.O.B. and C.I.F.
The growth in bilateral trade has not been without its accompanying issues and problems. Both
nations are negotiating membership in the Trans-Pacific Strategic Economic Partnership
Agreement (TPP), a multilateral trade group. For its part, Vietnam has indicated a desire to foster
closer trade relations by applying for acceptance into the U.S. General System of Preferences
(GSP) program, and participating in negotiations of a bilateral investment treaty (BIT). The
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growth in trade has also created sources of trade friction. A rapid increase in Vietnam’s clothing
exports to the United States led to the implementation of a controversial monitoring program
from 2007 to 2009. The growth in Vietnam’s export of catfish has also generated tensions
between the two nations. Other economic issues have had an indirect effect on bilateral relations,
such as claims of poor working conditions in factories in Vietnam, Vietnam’s designation as a
“non-market economy,” allegations of inadequate intellectual property rights (IPR) protection in
Vietnam, and Vietnam’s exchange rate policy.
This report will examine each of these trade issues, discussing their main elements and exploring
their potential implications for the 112th Congress. This will be followed by an analysis of key
trends in bilateral trade to discern any potential sources of trade friction in the future.
Trans-Pacific Strategic Economic Partnership
Agreement (TPP)
The Bush Administration notified Congress of its intention to enter into negotiations with the
members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP) on September 22,
2008.7 The TPP—previously known as the P4—is a multilateral free trade agreement between
Brunei, Chile, New Zealand, and Singapore that came into force in 2006.8 The U.S.
announcement of interest in joining the TPP was quickly followed by similar expressions of
interest by Australia, Malaysia, Peru, and Vietnam.
In the President’s 2010 Annual Report on the U.S. trade agreements program, the Obama
Administration stated that U.S. participation in the TPP “is the strongest vehicle for achieving
economic integration across the Asia-Pacific region and advancing U.S. economic interests with
the fastest-growing economies in the world.”9 Vietnam’s Deputy Prime Minister and Foreign
Minister Pham Gai Khiem listed negotiations to join the TPP—along with the U.S. BIT talks and
Partnership and Cooperative Agreement with the European Union—as among Vietnam’s top trade
priorities in 2009.10 During an April 2010 speech in Washington, DC, Prime Minister Nguyễn Tấn
Dũng made particular note of both countries’ participation in the TPP negotiations.11
The first meeting of the interested parties was held in Melbourne, Australia, on March 15-19,
2010. Since then, three subsequent rounds were held in June, October, and December 2010. A
fifth round of talks is scheduled to be held in February 2011 in Chile.
Vietnam’s participation in the TPP negotiations could complicate U.S. intentions. Whereas the
other parties involved in the negotiations are generally viewed as having comparatively open
7 For more information on U.S. interest in the TPP Agreement, see CRS Report R40502, The Trans-Pacific Partnership
Agreement, by Ian F. Fergusson and Bruce Vaughn.
8 Because of differences in the timing of the agreement’s approval, the TPP Agreement came into force on different
dates in 2006 for the four current members—May 1 for New Zealand and Singapore, June 12 for Brunei Darussalam
and November 8 for Chile.
9 Office of the U.S. Trade Representative, 2010 Trade Policy Agenda and 2009 Annual Report of the President of the
United States on the Trade Agreements Program, Washington, DC, March 2010.
10 “Vietnam to Pursue Foreign Policy of Peace in 2009,” Vietnam News Agency, January 23, 2009.
11 Prime Minister Dũng’s speech at a breakfast held by the U.S.-ASEAN Business Council on April 14, 2010.
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trade policies, Vietnam remains a mixed economy with considerable government intervention.
Given that the apparent U.S. goal is to create a more open and comprehensive free trade area in
the Asia-Pacific, Vietnam’s participation in the talks could constrain U.S. efforts to expand the
scope and depth of the TPP. Backers of Vietnam’s participation in the negotiations maintain that it
further opens a sizeable market to U.S. exports and investments, and could accelerate economic
reforms in Vietnam.
Another complicating factor is Vietnam’s support for ASEAN’s discussions with other nations to
form a pan-Asian trade association that could exclude the United States.12 Over the last several
years, ASEAN has organized meetings with various configurations of Asian nations—such as the
ASEAN + 3 (China, Japan, and South Korea), and ASEAN + 6 (Australia, China, India, Japan,
New Zealand, and South Korea)—to discuss the formation of a free trade area that would include
only Asian nations. However, in an April 2010 meeting with CRS, Vietnamese trade officials
indicated that Vietnam would like to see the United States take a more active role in a possible
ASEAN + 8 (Australia, China, India, Japan, New Zealand, Russia, South Korea, and the United
States) forming the basis for a larger regional trade association. Some observers have speculated
that the U.S. decision to formally join the East Asia Summit in 2011,13 which will include all the
ASEAN +8 nations, may indicate a willingness to consider modes for Asian economic integration
other than the TPP.
If a TPP agreement is concluded, the 112th Congress would have to consider implementing
legislation to revise current U.S. law to make it consistent with the terms of the agreement.
Unlike the ratification of international treaties, the implementing legislation must be approved by
both the House of Representative and the Senate.14
Vietnam’s Generalized System of Preferences (GSP)
Application15
In May 2008, Vietnam formally requested to be added to the U.S. Generalized System of
Preferences (GSP) program as a “beneficiary developing country” (BDC). On June 20, 2008, the
office of the U.S. Trade Representative (USTR) announced that it was initiating a formal review
of Vietnam’s eligibility for GSP benefits and would accept public comments on the application
until August 4, 2008. Since then, there has been no formal announcement from USTR regarding
the status of Vietnam’s GSP application.
12 For more about the complicated dynamics of regionalism in Asia, see CRS Report RL33653, East Asian Regional
Architecture: New Economic and Security Arrangements and U.S. Policy, by Dick K. Nanto
13 According to ASEAN’s official webpage, the East Asia Summit is “a forum for dialogue on broad strategic, political
and economic issues of common interest and concern with the aim of promoting peace, stability and economic
prosperity in East Asia.” The current EAS members are the 10 ASEAN members, plus Australia, People’s Republic of
China, Republic of India, Japan, Republic of Korea, and New Zealand. Russia and the United States are set to become
members in 2011.
14 The proposed TPP agreement would be presented to Congress as a Congressional-Executive Agreement, not as a
treaty. For more information on Congressional-Executive Agreements, see CRS Report 97-896, Why Certain Trade
Agreements Are Approved as Congressional-Executive Agreements Rather Than as Treaties, by Jeanne J. Grimmett.
15 For a more detailed examination of Vietnam’s GSP application, see CRS Report RL34702, Potential Trade Effects of
Adding Vietnam to the Generalized System of Preferences Program, by Michael F. Martin and Vivian C. Jones.
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The U.S. GSP program authorizes the President to grant duty-free treatment for any eligible
product from any beneficiary country.16 Initially created by Title V of the Trade Act of 1974 (P.L.
93-618) for a 10-year period, the GSP program has been repeatedly renewed by Congress, most
recently in a one-year extension on December 22, 2009, as part of P.L. 111-124. The statute also
provides the President with specific political and economic criteria to use when designating
eligible countries and products.
Inclusion in the U.S. GSP program is a high trade priority for the Vietnamese government.
Vietnam has already been accepted into several other GSP programs, including those of Canada,
the European Union (EU), and Japan. The status of Vietnam’s GSP application was reportedly
raised during the meeting of the U.S.-Vietnam Trade and Investment Framework Agreement
(TIFA) Council in Washington, DC, from April 15-22, 2009.17 On December 2, 2009, Vietnam’s
Foreign Minister Pham Gia Khiem reportedly asked former U.S. Trade Representative Susan
Schwab to urge the Obama Administration to add Vietnam to the U.S. GSP program.18 According
to sources in Vietnam’s Ministry of Foreign Affairs (MOFA), the Vietnamese government sees its
acceptance into the GSP program as another step in the normalization of bilateral relations.
Compliance with Eligibility Criteria
For the United States, Vietnam’s GSP application poses several problems with respect to its
compliance with the program’s eligibility criteria. In particular, there is a question whether
Vietnam is a “Communist” country. Under the provisions of the Trade Act of 1974, a
“Communist” country is ineligible for the GSP program unless it meets certain additional
conditions. Another area of possible non-compliance with the GSP program’s eligibility criteria is
whether Vietnam has “taken steps to provide its workers with internationally recognized worker
rights.” There are also indications that Vietnam’s IPR protection may not be adequate to satisfy
GSP eligibility. Current U.S. law allows the President to waive compliance with the worker rights
and IPR protection criteria, but not the “Communist” country criterion.
Is Vietnam a “Communist” Country?
In its present form, the GSP program excludes “Communist” countries unless the President
determines three conditions have been met. First, the United States must have conferred NTR
status to the country. Second, the country must be a member of both the International Monetary
Fund (IMF) and the World Trade Organization (WTO). Third, the country must be “not
dominated or controlled by international communism.”
U.S. law does not provide any general definition of a “Communist” country. Some observers
point to Vietnam’s official name—the Socialist Republic of Vietnam—and the government’s
control by the Communist Party of Vietnam (Đảng Cộng sản Việt Nam) as prima facie evidence
that Vietnam is a “Communist” country. Other observers counter that after over two decades of
doi moi,19 Vietnam no longer is a “Communist” country in terms of its economic system. In
16For background information on the U.S. GSP program, see CRS Report RL33663, Generalized System of
Preferences: Background and Renewal Debate, by Vivian C. Jones.
17 “Vietnam, U.S. Boosting Agricultural, Trade, Labor Cooperation,” Vietnam Business Forum, April 28, 2009.
18 “Former US Trade Representative Visits Vietnam,” Voice of Vietnam News, December 3, 2009.
19 Doi Moi, which literally means “change and newness” and is often translated as “renovation,” is the Vietnamese
(continued...)
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addition, even if Vietnam was a “Communist” country, according to these observers, it is “not
dominated or controlled by international communism” because no such entity exists following the
collapse of the Soviet Union.
Workers’ Rights
Among the GSP eligibility criteria, Vietnam’s recognition of internationally accepted workers’
rights has proven to be the most problematic. Prior to the 1986 advent of doi moi, there were
many allegations about substandard working conditions in Vietnam, including “sweatshop”
working conditions, the use of child labor, and severe restrictions on the right of association and
collective bargaining.20 Since then, the Vietnamese government is generally perceived to have
made concerted efforts to comply with many internationally recognized labor standards.
In its application for GSP designation, the Vietnamese government focused on its partnership with
the International Labor Organization (ILO) and its ratification of several of the ILO’s conventions
as demonstrating its commitment to comply with international labor rights standards. Despite
these efforts by the Vietnamese government, critics still maintain that working conditions remain
below international standards. In particular, Vietnam has been criticized for its failure to allow
independent labor unions and respect the right of association (see section on “Workers’ Rights”
below).
IPR Protection
Vietnam remained on the U.S. Special 301 Watch List in 2010, with the official report noting a
rise in online piracy.21 The 2010 National Trade Estimate Report on Foreign Trade Barriers
(NTE)22 states that:
While recognizing the strides Vietnam has made in IPR protection and enforcement over the
past several years, the United States noted that enforcement efforts have not kept pace with
rising levels of IP infringement and piracy in the country. Furthermore, administrative
enforcement actions and penalties—the most commonly used means of enforcing IPR in
Vietnam—have not served as a sufficient deterrent.
The NTE report also notes that in 2009 Vietnam revised its IPR Law, as well as IPR-related
provisions in the Criminal Code, to provide criminal penalties for IPR infringement conducted on
a commercial scale. In addition, the NTE indicated that “Vietnamese agencies took some initial
steps to enforce IP protections on the Internet.”
Statements by past U.S. officials indicated that Vietnam’s IPR protection was playing a role in the
decision on its GSP application. In an interview on March 9, 2009, Jay L. Eizenstat, ex-director
(...continued)
Communist Party’s term for reform and renovation in the economy. This term was coined in 1986 for Vietnam’s
transition from the centrally planned command economy to a “market economy with socialist direction.”
20 For more information about pre-Doi Moi working conditions in Vietnam, see CRS Report RL30896, Vietnam’s
Labor Rights Regime: An Assessment, coordinated by Mark E. Manyin.
21 For the complete text of the 2010 Special 301 Report, see http://www.ustr.gov/webfm-send/1906.
22 Office of the U.S. Trade Representative, The 2010 National Trade Estimate Report on Foreign Trade Barriers,
Washington, DC, March 2010.
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for customs affairs for USTR in the Bush Administration, pointed out that “intellectual property
rights violations are easily seen in Vietnam and this is the reason for the unlikelihood of gaining
GSP although Vietnam satisfies basic criteria.”23 It is unclear to what extent this attitude is held in
the Obama Administration.
Congressional Implications
On December 31, 2010, the GSP program will expire. The 111th Congress did not pass legislation
expending the GSP program beyond the extension it passed on December 22, 2009, as part of P.L.
111-124. Until such time that Congress reestablishes the GSP program, it is highly unlikely that
there will be a decision on Vietnam’s pending application.
Under previous U.S. law, Congress had no direct role in the determination of whether Vietnam
was to be accepted into the U.S. GSP program; the authority to make that decision was delegated
to the President of the United States. The President was required to notify Congress of his
intention.
If the GSP program is reestablished, there are several ways by which Congress could indicate its
preferences on this issue. In addition to hearings and communications to the Administration from
members of Congress, Congress could authorize or instruct the President to designate—or not to
designate—Vietnam as a beneficiary developing country (BDC), either as part of the legislation
to extend the GSP program or in separate legislation. Alternatively, Congress could pass
legislation—separately or as part of the renewal of the GSP program—stipulating additional
eligibility criteria for the President to consider when deciding to confer BDC status to Vietnam.
Both versions of the Vietnam Human Rights Act introduced during the 111th Congress (H.R. 1969
and S. 1159) would have prohibited the inclusion of Vietnam in the GSP program unless the
President determines and certifies that Vietnam has met certain specified workers’ rights criteria.
Each chamber of Congress could also pass a resolution calling on the President to approve or
deny Vietnam’s application for inclusion in the U.S. GSP program.
Bilateral Investment Treaty (BIT) Negotiations
During their June 2008 meeting, President Bush and Prime Minister Dũng announced the launch
of talks to establish a bilateral investment treaty (BIT).24 BITs are designed to improve the
climate for foreign investors by establishing dispute settlement procedures and protecting foreign
investors from performance requirements, restrictions on transferring funds, and arbitrary
expropriation. The United States has signed 47 BITs, with 40 currently in force. Vietnam has
signed over 50 BITs.
23 “Exporters Must be Good at Product Valuation, Seminar,” Vietnam Business Forum, March 9, 2009.
24 For more information about BITs and the U.S. BIT program, see CRS Report RL33978, The U.S. Bilateral
Investment Treaty Program: An Overview, by Martin A. Weiss.
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Status of the Negotiations
The first round of BIT negotiations was held in Washington, DC, from December 15-18, 2008.
The Vietnamese delegation included representatives from the Ministry of Planning and
Investment, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Justice,
and the State Bank of Vietnam. The U.S. delegation included representatives of the U.S. Trade
Representative’s Office, the Department of State, the Department of Commerce, and the Treasury
Department. Since then, two more rounds of talks have been held—one on June 1-2, 2009, in
Hanoi, and another on November 17-19, 2009, in Washington, DC. A proposed fourth round of
talks that was to be held in early 2010 has not happened. As the host for the next bilateral BIT
talks, Vietnam is supposed to suggest when and where to hold the meetings. According to USTR,
Vietnam has not suggested a date for the talks. The ongoing TPP talks have seemingly reduced
the interest in both countries in concluding the BIT agreement.
The Vietnamese government appears interested in concluding a BIT with the United States, both
because it could foster greater inward FDI from the United States and because it could serve as a
stepping-stone to a possible free trade agreement (FTA) with the United States. The U.S.
government’s interest in BIT negotiations appears primarily focused on providing better
protection and access for U.S. investors in Vietnam, while avoiding compromising domestic
economic priorities and needlessly relinquishing national sovereignty. Representatives of the
business communities in both the United States and Vietnam have expressed interest in the
successful conclusion of the BIT negotiations.
The United States has generally based its past BIT negotiations on a model BIT. In 2004, the
Bush Administration revised the model BIT, partially in response to provisions in the Trade Act of
2002 (P.L. 107-210). In the Trade Act of 2002, Congress mandated several negotiating objectives
to narrow the scope of investment protection. The act stated that the principal U.S. negotiating
objective on foreign investment is to reduce or eliminate barriers to investment, “while ensuring
that foreign investors in the United States are not accorded greater substantive rights with respect
to investment protections than United States investors in the United States, and to secure for
investors important rights comparable to those that would be available under United States legal
principles and practice.” The Obama Administration is reportedly reviewing the current model
BIT, and may be deferring progress with Vietnam until the review is completed.25
In addition, the existing 2001 Bilateral Trade Agreement (BTA) between the United States and
Vietnam included provisions in Chapter 4 governing investment and the future negotiation of a
bilateral investment treaty.26 Article 2 commits both nations to providing national and MFN
(NTR) treatment to investments. Article 4 provides for a dispute settlement system for bilateral
investments. Article 5 requires both nations to ensure that the laws, regulations, and
administrative procedures governing investments are promptly published and publicly available.
Article 11 pertains to compliance with the provisions of WTO Agreement on Trade-related
Investment Measures (TRIMs). Article 13 states that both nations “will endeavor to negotiate a
bilateral investment treaty in good faith within a reasonable period of time.”
25 “Hormats: BIT to Balance Business Needs with Labor, Environmental Goals,” World Trade Online, March 10, 2010.
26 For the complete text of the 2001 BTA, go to http://www.usvtc.org/trade/bta/text/.
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The Role of Congress
If the United States and Vietnam successfully complete the negotiations of a BIT during the 112th
Congress, the treaty will be subject to Senate ratification. Action on the part of Congress as a
whole may be required if the terms of the BIT require changes in U.S. law.
Non-Market Economy Designation
Under U.S. trade law (19 U.S.C. 1677), the term “nonmarket economy country” means “any
foreign country that the administering authority determines does not operate on market principles
of cost or pricing structures, so that
sales of merchandise in such
Vietnam’s Economy at a Glance
country do not reflect the fair value
Starting in 1986, Vietnam started the transformation of its Soviet-
of the merchandise.” In making such
style central y planned economy into a market-oriented economy. Its
a determination, the administrating
agricultural sector, which was decollectivized in the 1990s, remains
authority of the executive branch is
the main source of employment in the country, but provides about
20% of GDP. The industrial sector, which contributes about 40% of
to consider such criteria as the
GDP, has also undergone a gradual shift from state-owned to
extent of state ownership of the
privately-owned production. Vietnam’s industrial output currently is
means of production, and
produced by foreign-owned enterprises (about 45% of industrial
government control of prices and
output), privately-owned domestic companies (about 35% of
industrial output), and state-owned enterprises (about 20% of
wages.
industrial output). Vietnam’s services sector (about 40% of GDP) has
also transitioned from primarily government-run to primarily private
For over 20 years, Vietnam has been
providers. Most goods and services are now distributed using market
transitioning from a centrally
mechanisms, but there remains significant government intervention
planned economy to a market
via subsidies for key industries and selected consumer goods.
Vietnam’s financial system is still dominated by state-owned banks,
economy. Under its doi moi policy,
but some private banks have emerged.
Vietnam has allowed the
development and growth of private
Vietnam’s real GDP grew by 5.32% in 2009, fueled by industrial and
service sector growth. Vietnam’s consumer price index (CPI) rose by
enterprise and competitive market
6.9%. The unemployment rate was 2.9%, but Vietnam continues to
allocation of most goods and
suffer from significant underemployment. Vietnam’s total exports
services. Although most prices have
were $56.6 billion; imports were $68.8 billion. Foreign direct
been deregulated, the Vietnamese
investment into Vietnam in 2009 was nearly $25 billion.
government still retains some formal
Although the shift in economic policy has led to rapid growth, it has
and informal mechanisms to direct
also brought many of the traditional problems of market-oriented
or manage the economy.
economies. Vietnam has periodically struggled with inflation, fiscal
deficits, trade imbalances, and other cyclical economic phenomena
common to market economies. Vietnam has also seen a rising
State-Owned Enterprises
income and wealth disparity, that at times has fueled discontent
among Vietnam’s poor and lower-income population.
For the United States, one of the
Source: General Statistics Office of Vietnam
main concerns about Vietnam’s
economy is the continued importance of state-owned enterprises (SOEs) in the nation’s industrial
sector. Between 1995 and 2009, the portion of Vietnam’s real industrial output produced by SOEs
declined from 50.3% to 23.5%.27 However, SOEs continue to dominate key sectors of Vietnam’s
economy, such as mining and energy. In addition, according to a study by the Vietnam Report
Company, 46% of the 500 largest enterprises in Vietnam are SOEs. The five largest enterprises –
27 Based on data from Vietnam’s General Statistics Office.
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Vietnam Oil and Gas Group, Vietnam National Petroleum Corporation, Vietnam Electricity,
Vietnam Post and Telecommunications Group, and Vietnam National Coal and Mineral Industries
Group – are all SOEs.
Many of Vietnam’s SOEs have been converted into quasi-private corporations through a process
known as “equitization,” in which some shares are sold to the public on Vietnam’s stock
exchange, and most of the shares remain owned by the Vietnamese government. Twenty years
ago, there were about 12,000 SOEs in Vietnam. By the end of 2009, the number of SOEs had
been reduced to 1,471 by either restructuring or equitization.28 To some analysts, however, the
retention of a controlling interest in the shares of the companies provides the Vietnamese
government with the means to continue to manage the operations of the equitized SOEs.
In August 2010, Prime Minister Dũng announced a plan for the reorganization of the remaining
SOEs.29 Prime Minister Dũng has called on every government agency responsible for the
administration of a SOE to submit a report on its economic performance by the end of 2010. The
stated goal is to restructure and reorganize all the SOEs to increase their efficiency by the end of
2015. The Asian Development Bank (ADB) is providing Vietnam with a $630 million loan to
help it reform its SOEs and improve corporate governance.30
The urgency to reform Vietnam’s SOEs is being driven, in part, by the recent financial problems
of Vietnam Shipbuilding Industry Group (Vinashin). Vinashin is reportedly nearly bankrupt, after
a series of poor investments in non-shipbuilding ventures.31 The company had run up $4.4 billion
in debts by June 2010, and was having trouble servicing its debt to both Vietnamese and non-
Vietnamese banks. It is unclear if the Vietnamese government will rescue Vinashin. On December
8, 2010, Planning and Investment Minister Võ Hồng Phúc stated that Vinashin was responsible
for its own debt, but that the government would help lead the company back to profitability.32
Following Minister Phúc’s statement, the state-owned Development Bank of Vietnam offered
Vinashin interest-free loans to help the company with its cash flow problems.33
Price and Wage Controls
The doi moi process has led to the gradual deregulation of most prices and wages in Vietnam.
However, the Vietnamese government maintains controls over key prices, including certain major
industrial products (such as cement, coal, electricity, oil and steel) and basic consumer products
(such as meat, rice, and vegetables). In December 2010, Prime Minister Dũng tightened controls
on various products to reduce inflationary pressure.34 Vietnam’s year-on-year consumer price
index (CPI) in November 2010 was 11%.
The Vietnamese government also maintains control over some wages. Government workers are
paid according to a fixed pay scale, and all workers are subject to a national minimum wage law.
28 “Time to Restructure State Enterprises,” Viet Nam News, November 26, 2010.
29 Kim Tan, “Government Shakes Up State-owned Companies,” Dantri International News, August 23, 2010.
30 For details, see ADB’s webpage – http://www.adb.org/projects/project.asp?id=39538&p=vieproj.
31 Leigh Murray, “Vinashin May Hurt Vietnam Banks,” Wall Street Journal, December 13, 2010.
32 “Vietnam Minister Says Vinashin Should Make Its Own Debt Payment,” Bloomberg, December 8, 2010.
33 “Vietnam Offers Loans to Ailing Shipbuilder Vinashin,” BBC, December 28, 2010.
34 “Vietnam to Set Price Controls on Commodities,” Vietnam Business News, December 2, 2010.
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Workers for private enterprises, foreign-owned ventures and SOEs receive wages based largely
on market conditions. Vietnam’s recent inflation has given rise to upward pressure on wages. The
Prime Minister’s anti-inflation policy is supposed to also curb wage increases.
The Vietnamese government asserts that most of the prices and wages in Vietnam are market-
determined, especially the prices of goods exported to the United States. In addition, Vietnamese
exports face strong competitive pressure from other Asian nations, such as Bangladesh, China,
Malaysia, and Thailand. As such, the Vietnamese government maintains that it should be
considered a market economy, particularly in anti-dumping and counterveiling duty cases.
Vietnam’s View
The Vietnamese government maintains that its economy is as much a market economy as many
other nations around the world, and has actively sought formal recognition as a market economy
from its major trading partners. A number of trading partners—including ASEAN, Australia, the
European Union, India, Japan, and New Zealand—have designated Vietnam a market economy
for purposes of international trade. Under the terms of its WTO accession agreement with the
United States, Vietnam is to remain a non-market economy for up to 12 years after its accession
or until it meets U.S. criteria for a “market economy” designation.35
Designation as a market economy has both symbolic and practical value for Vietnam. The
Vietnamese government views market economy designation as part of the normalization of trade
relations with the United States. In addition, Vietnam’s designation as an NME generally makes it
more likely that antidumping and countervailing duty cases will result in adverse rulings against
Vietnamese companies. In theory, the 112th Congress could consider legislation weighing in on
the designation of Vietnam as a market or non-market economy by amending or superseding
existing U.S. law.
Catfish
Catfish have been a constant source of trade friction between the United States and Vietnam for
the past decade. Vietnam is a major exporter of frozen fish fillets using certain varieties of fish—
known as basa and tra in Vietnamese—that are commonly referred to as catfish in the global fish
market.36 Since 1999, Vietnamese exports of basa and tra frozen fish fillets have secured a
growing share of the U.S. market, despite the objections of the U.S. catfish industry and the
actions of the U.S. government. In 2009, Vietnam reportedly exported 47,000 tons of basa and
tra, worth $134 million to the United States.37
Over the last 10 years, the United States has taken several actions that were designed to have an
impact on the import of Vietnamese basa and tra. In 2002, Congress passed legislation that
35 Other countries considered non-market economies by the United States include Armenia, Azerbaijan, Belarus, China,
Georgia, Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan.
36 Basa (pangasius bocourti) and tra (pangasius hypophthalmus) are fresh-water fish from the Mekong River basin of
Vietnam. U.S. catfish (ictalurus punctatus)—also known as channel catfish—are also fresh-water fish, typically raised
for commercial purposes in aquaculture ponds. All three species are siluriformes, with the characteristic barbels
(whiskers) from which the name catfish was derived.
37 Ibid.
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prohibited the labeling of basa and tra as “catfish.”38 In August 2003, the U.S. government
imposed antidumping duties on “certain frozen fish fillets from Vietnam,” including basa and
tra.39 Despite these measures, Vietnam’s exports of basa and tra continued to rise.
In the eyes of the Vietnamese government, the U.S. response to the growth of Vietnam’s basa and
tra exports constitutes a case of trade protectionism designed to shelter U.S. catfish producers
from legitimate competition. Vietnam also points to U.S. anti-dumping measures on Vietnamese
shrimp as an indication of U.S. protectionism (see “Non-Market Economy Designation”).40
Supporters of U.S. trade policies against Vietnam’s exports of basa and tra say the measures are
designed to defend U.S. consumers and businesses from the unsafe products and unfair business
practices of Vietnam. In November 2010, the Vietnam Association of Seafood Exporters and
Producers (VASEP) cautioned Vietnam’s seafood processors about carcinogenic residuals from
herbicides in shrimp, after Japan tightened its inspections of Vietnamese exports.41
The ongoing tensions around catfish trade were heightened by two fairly recent events. The first
was the passage of the 2008 Farm Bill (P.L. 110-246) by the 110th Congress on May 22, 2008.
The second event was the ITC’s determination on June 15, 2009, to keep in place the antidumping
duties on certain frozen fish fillet imports from Vietnam “for the foreseeable future.”
2008 Farm Bill
The legal status of Vietnam’s basa and tra exports to the United States was brought into question
by the provisions of section 11016 of the 2008 Farm Bill (P.L. 110-246), enacted on June 18,
2008. The section, entitled “Inspection and Grading,” established a voluntary fee-based grading
program for “catfish (as defined by the Secretary).” The law also stipulated specific aspects of the
examination and inspection of catfish, including the conditions under which the fish were raised
and transported. By these provisions, the 2008 Farm Bill effectively transferred the regulation of
imported catfish from the Food and Drug Administration (FDA) to the USDA, which is generally
viewed as maintaining stricter inspection standards than the FDA.
The possibility that the Secretary of Agriculture may redefine catfish to include basa and tra,
thereby making them subject to the stricter USDA inspection standards, has brought forth
objections from Vietnam’s Ambassador to the United States, its Minister of Agriculture and Rural
Development, and Vietnam’s catfish industry (including their trade association, the Vietnam
Association of Seafood Exporters and Producers, or VASEP). Ambassador Le Cong Phung sent a
letter to nearly 140 members of Congress, suggesting that a reclassification of basa and tra as
catfish would call into question the U.S. commitment to the WTO and endanger the jobs of more
38 Language was introduced into the Farm Security and Rural Investment Act of 2002 (P.L. 107-171) that restricted the
legal definition of catfish to the family Ictaluridae, effectively banning the use of the term “catfish” for basa and tra.
39 International Trade Administration, “Notice of Antidumping Duty Order: Certain Frozen Fish Fillets from the
Socialist Republic of Vietnam,” 68 FR 47909, August 12, 2003.
40 Starting in 2005, the United States began imposing anti-dumping duties on “certain frozen and canned warmwater
shrimp” from Vietnam after the International Trade Administration (ITA) determined that they were being sold at “less
than fair market value.” Because Vietnam is a non-market economy, the ITA used cost estimates from Bangladesh to
determine “fair market value.” In November 2010, the United States extended the anti-dumping duties for another five
years. Vietnam is appealing this determination to the World Trade Organization, citing the U.S. use of “zeroing,” a
controversial method for calculating anti-dumping duties.
41 “Toxic Residues Could Shrivel Shrimp Exports: Experts,” Vietnam Economy News, November 12, 2010.
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than 1 million Vietnamese farmers and workers. In addition, an opinion article in the Wall Street
Journal referred to the possible reclassification of basa and tra as catfish as “protectionism at its
worst.”42 Supporters of the provisions of the 2008 Farm Bill state that it provides greater
protection to U.S. consumers.
Draft regulations for catfish food safety inspection were delivered to the Office of Management
and Budget (OMB) by the USDA on November 13, 2009. On February 16, 2010, OMB
reportedly decided to extend its review of proposed regulations for an undisclosed period of
time.43 Over a year has passed since the regulations were delivered to OMB and no decision has
been made.
A copy of the draft regulations obtained by the Washington Post indicated that Vietnam’s basa
and tra would be subject to the new safety inspections.44 During his testimony to the
Subcommittee on Agriculture, Rural Development, the Food and Drug Administration and
Related Agencies of the Senate Committee on Appropriations on March 2, 2010, Secretary of
Agriculture Tom Vilsack stated that three criteria were considered in developing the regulations:
(1) consumer safety; (2) scientific evidence; and (3) trade relations.45 Following the hearing,
Senator Thad Cochran reportedly asked Secretary Vilsack about a proposed cut in the USDA
Catfish Inspection Program in the FY2011 budget.46 On that same day, Senator Scott Brown,
Senator John Kerry, and Representative Barney Frank sent a joint letter to OMB Director Peter
Orzsag asking for an explanation for the delay in completing the review of the draft regulations
and urging that OMB bring the review to a conclusion.47
As a possible preparation for heightened U.S. inspection requirements, Vietnam’s Ministry of
Agriculture and Rural Development (MOARD) has tightened export hygiene standards for basa
and tra. Effective April 12, 2010, all basa and tra exported from Vietnam will need certificates for
hygiene and food safety issued by the National Agro-Forestry-Fisheries Quality Assurance
Department.48 In addition, MOARD and the Ministry of Industry and Trade have contracted U.S.-
based Mazzetta Company to train Vietnamese fish breeders how to comply with U.S. standards.49
The Antidumping Sunset Review
While the USDA prepared the new catfish regulations, the ITC issued on June 15, 2009, a final
determination in its five-year (sunset) review of the existing antidumping duties on “certain
42 “A Fish by Any Other Name,” Wall Street Journal, May 20, 2009.
43 Kimberly Kindy, “OMB Extends Its Review of Rules for Imported Catfish,” Washington Post, February 17, 2010.
44 Kimberly Kindy, “USDA Rules to Emerge from Fight over Imported Catfish,” Washington Post, February 16, 2010.
The USDA has not released the draft regulations. A Freedom of Information Act request was submitted by a private
concern in January 2010.
45 U.S. Congress, Senate Committee on Appropriations, Subcommittee on Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies, Fiscal Year 2011 budget request for the Department of Agriculture, 111th
Cong., 1st sess., March 2, 2010.
46 Wally Northway, “Cochran Questions USDA Budget,” Mississippi Business Journal, March 3, 2010.
47 Letter from Senator Scott Brown, Senator John Kerry, and Representative Barney Frank to Peter Orzsag, OMB
Director , March 2, 2010, http://www.house.gov/frank/letters/official/2010/03-02-10-orzag-definition-catfish.pdf.
48 “Catfish Quality Tests Tightened for Export Hygiene Standards,” Vietnam News, April 15, 2010.
49 “US Firm to Help Train Vietnamese Fish Farmers,” Thanh Nien News, March 27, 2010.
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frozen fish fillets from Vietnam.”50 In a unanimous decision, the six ITC commissioners voted to
continue the antidumping duties “for the foreseeable future.” The Vietnamese government and the
Vietnam Fishery Association expressed their opposition to the ITC’s decision. Vietnam’s deputy
minister of trade and industry, Nguyen Thanh Bien, was quoted as saying, “in this economic
context, this decision shows the heavy protectionism of the U.S. judicial and executive
agencies.”51
Implications for the 112th Congress
Two of the last four Congresses have passed legislation containing provisions that critics assert
are designed to restrict or prevent the import of basa and tra from Vietnam and protect the U.S.
catfish industry from foreign competition. Given that the 110th Congress chose to take action with
respect to the definition and regulation of catfish, the 112th Congress may be disinclined to alter
or reverse a process already underway. However, there are aspects of the issue that the 112th
Congress might be more inclined to take up, such as reclaiming the authority to define catfish or
stipulating specific examination and inspection requirements for imported catfish, or fish and fish
products in general. Congress might also press OMB to complete its review of the proposed
regulations or provide a more complete explanation for the delay.
Other Economic Issues
The preceding issues are topics where there has been or continues to be direct bilateral
interaction. In addition, there are several economic issues that indirectly influence relations
between the United States and Vietnam. Of these, the most prominent issues for the 112th
Congress likely include clothing imports from Vietnam, workers’ rights, IPR protection, and
Vietnam’s exchange rate policy.
U.S. Clothing Imports from Vietnam
Vietnam’s clothing exporters to the United States were among the greatest beneficiaries of the
U.S. decision to grant Vietnam conditional NTR status in December 2001 (see Figure 1).52 Up
until 2002, U.S. imports of clothing from Vietnam were small both in value (below $50 million)
and as a share of total imports from Vietnam (below 10%). Following the U.S. extension of
conditional NTR to Vietnam, U.S. clothing imports from Vietnam shot up in value and share. As a
share of total imports, clothing peaked in 2003 at 51.4%. The value of U.S. clothing imports from
Vietnam has continued to rise every year until 2009, with the largest year-on-year increases
occurring in 2003 and 2007—the first full years after the U.S. granted Vietnam conditional and
permanent NTR status, respectively. Vietnam has become a major source of U.S. clothing
imports, second only to China. In 2009, over 40% of U.S. clothing imports came from Vietnam.
50 Under the provisions of the Uruguay Round Agreements Act (P.L. 103-465), antidumping duties must be revoked
after five years unless the DOC and the ITC determine that revoking the duties would lead to the continuance or
recurrence of dumping and cause material injury within a foreseeable time period.
51 “Vietnam Criticizes US Duties on Catfish as Protectionist,” Earth Times, June 17, 2009.
52 For purposes of this section of the report, clothing imports and exports will be defined as commodities traded under
chapters 61 and 62 of the U.S. Harmonized Tariff System (HTS), unless otherwise noted.
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Figure 1. U.S. Clothing Imports from Vietnam
Value ($ billions) and Share of Total U.S. Imports from Vietnam
6.0
60%
5.0
50%
4.0
40%
3.0
30%
2.0
20%
1.0
10%
0.0
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Value
Share
Source: U.S. International Trade Commission.
Notes: Imports valued using General Customs method.
The two spikes in clothing imports gave rise to efforts to restrict clothing trade with Vietnam, first
in the form of a separate bilateral textile agreement and later in the form of a unilateral
monitoring program that expired in January 2009.53 In both cases, Vietnam initially protested U.S.
efforts to restrict clothing trade, but in the end complied with the U.S. policies. Several members
of Congress, and in particular members with significant clothing and textile manufacturing in
their districts or states, voiced concern that a “surge” in Vietnamese clothing exports to the
United States could cause damage to U.S. clothing and textile companies and workers. However,
major U.S. retailers and importers maintained that these two programs would restrict trade from
Vietnam, causing harm to U.S. companies and consumers.
Workers’ Rights
The U.S. government and a number of non-governmental organizations (NGOs) such as Human
Rights Watch have been critical of Vietnam’s restrictions on workers’ rights. There is a general
recognition that Vietnam has made significant improvements in its labor laws, but that local
government enforcement and business compliance remain an ongoing problem. The State
Department’s 2009 human rights report on Vietnam singled out problems with suppression of
independent labor unions, failure to enforce laws governing the right to organize, child labor in
rural areas, and inadequate safety conditions (especially in small- and medium-sized enterprises).
53 For more information on the bilateral textile agreement and the monitoring program, see CRS Report RL34262, U.S.
Clothing Imports from Vietnam: Trade Policies and Performance, by Michael F. Martin.
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Workers in Vietnam have the legal right to collective bargaining. At present, all labor unions in
Vietnam must be a member of the Vietnam General Confederation of Labor (VGCL). The VGCL
is supposed to organize a union within six months of the establishment of any new business,
regardless of its ownership—state, foreign, or private. According to the State Department’s 2009
Country Report on Human Rights Practices, “in actuality only 85% of state-owned enterprises,
60% of foreign-invested enterprises, and 30% of private enterprises were unionized.”54 Human
Rights Watch has also raised concern about the ability of Vietnamese workers to call an official
strike, especially at state-owned enterprises (SOEs).55
Efforts to organize independent unions in Vietnam reportedly have been thwarted by government
suppression, including the arrest and imprisonment of union leaders. Other observers, however,
counter that since the launch of doi moi, worker rights have made progress despite the restrictions
on their independent right to organize. These observers point out that hundreds of unaffiliated
(and therefore unofficial) “labor associations” have sprouted without significant repression, that
the VGCL has evolved into a more aggressive advocate for workers, and in many recent cases,
Vietnamese workers have gone on strike reportedly because they felt that they were not well-
represented by the official union.
The Vietnamese government appears to tacitly accept that it has problems with the enforcement
of its labor laws. Vietnam’s official news agencies—Thanhnien News, Vietnam Net, and Voice of
Vietnam News—ran a series of reports in 2008 and 2009 describing problems with Vietnam’s
protection of workers’ rights, the flaws of the VGCL, and efforts to improve working conditions
in Vietnam.56 The humanitarian aid agency of the Australian Council of Trade Unions, which has
worked closely with the VGCL on workers’ education, wrote in a letter to Human Rights Watch,
“Our experience in workers’ education in Vietnam also leads us to believe that the government,
far from trying to lower workers’ conditions or repress workers, is sensitive to the needs of
women and men workers.”57
The Vietnamese government is working with various international organizations to improve its
labor laws, regulations and enforcement. Vietnam’s Ministry of Labour, Invalids, and Social
Affairs (MOLISA) and the VGCL are currently working with the International Labor
Organization (ILO) to finalize a new Labour Code and Trade Union Law, to be submitted to
Vietnam’s National Assembly for consideration in October 2011.58 The ILO and MOLISA are
also working with Spain’s Agency for International Development Cooperation on a program to
54 Bureau of Democracy, Human Rights, and Labor, 2009 Country Reports on Human Rights Practices, 2009 Human
Rights Reports: Vietnam, U.S. Department of State, Washington, DC, March 11, 2010.
55 Human Rights Watch, Not Yet a Workers’ Paradise, New York, NY, May 2009.
56 Among these articles are: “Impotent Labour Unions Don't Help Workers,” Thanhnien News, June 22, 2008;
“Government Units to Tackle Labour Disputes,” Vietnam Net, February 21, 2009; “Vietnam Works for Harmonious
Labour Relations,” Voice of Vietnam News, March 18, 2009; Minh Nam, “Flouting of Labor Laws Rife in HCMC:
Report,” Thanhnien News, December 2, 2008; and Minh Nam, “HCMC Officials call to Strengthen Unions, Tighten
Labor Laws,” Thanhnien News, February 12, 2009.
57 Peter Jennings, Re: Human Rights Watch Report ‘Not Yet a Workers’ Paradise’ of May 4, 2009, Australian People
for Health, Education and Development Abroad, Inc., Sydney, June 17, 2009.
58 The new labor law was to have been submitted in October 2010 (see “Labour Law Reform to Boost Integration,”
Vietnam News, April 2, 2010), but MOLISA and the VGCL requested a postponement from the National Assembly to
permit more consultation with stakeholders. MOLISA is overseeing the drafting of the proposed law, but has assigned
VGCL the responsibility of preparing the law’s trade union provisions.
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eliminate child labor in Vietnam. In addition, the United Nations is providing $2 million for a
program to help the VGCL improve its grassroots relations.59
IPR Protection
The U.S. government remains critical of Vietnam’s record on intellectual property rights (IPR)
protection. Vietnam was included in the “Watch List” in the U.S. Trade Representative’s 2010
Special 301 Report, an annual review of the global state of IPR protection and enforcement.60
Vietnam remained on the Watch List because of its continuing problems with IPR piracy and
trademark infringement. The report does state that “the United States is encouraged by recent
steps that the government has taken to improve IPR protection and enforcement, including recent
amendments to the IP Law, an increase in administrative fines for copyright infringement, and a
continuation of efforts to address Internet piracy ... However, overall enforcement efforts remain
insufficient to address rampant piracy and counterfeiting.” The report also noted that the U.S.
government had funded IPR enforcement training in Vietnam in 2009.
The perceived continuing problems with Vietnam’s IPR protection may play a role in any
consideration of its GSP application, as well as the bilateral BIT negotiations. The Foreign
Relations Authorization Act, Fiscal Years 2010 and 2011 (H.R. 2410) and the Foreign Relations
Authorization and Reform Act, Fiscal Years 2010 and 2011 (H.R. 2475) would have established
10 additional “intellectual property attachés to serve in United States embassies or other
diplomatic missions.” Assignment priority would be given to countries identified in the USTR’s
Special 301 Report, which could imply the assignment of one of the attachés to Vietnam. H.R.
2410 was passed by the House on June 10, 2009, and referred to the Senate on June 22, 2009. The
Senate took no further action on the bill.
Vietnam’s Exchange Rate Policy
One aspect of Vietnam’s economic system that has not been changed by doi moi is its exchange
rate policy. Vietnam continues to maintain a government-managed exchange rate relative to the
U.S. dollar. The State Bank of Vietnam (SBVN) sets a range in which the value of the Vietnamese
dong can fluctuate relative to the U.S. dollar. Since March 2009, the SBVN has widened the band
to ±5% from the official exchange rate, and devalued the dong four times. The last devaluation
occurred on August 18, 2010, lowering the official interbank exchange rate to 18,932 dong = $1.
Key Trends in Bilateral Trade
The preceding sections of the report have focused on current and past issues in U.S.-Vietnam
trade relations. The final section of the report attempts to identify potential sources of future trade
friction by examining trends in bilateral trade figures. The focus will be on three aspects of recent
trade relations—merchandise trade, trade in services, and foreign direct investment (FDI).
59 “UN Aid Helps Improve Trade Union Capacity,” Voice of Vietnam News, April 1, 2010.
60 For a copy of the 2009 report, see http://www.ustr.gov/about-us/press-office/reports-and-publications/2010-3.
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Merchandise Trade
Only a few years have passed since trade relations between the United States and Vietnam have
opened. As previously mentioned, the rapid growth in Vietnam’s export of two types of
products—clothing and catfish—quickly made them sources of trade tension between the two
nations. However, other commodities that contribute more to U.S.-Vietnam trade flows could also
become touch points for trouble in bilateral trade relations.
Table 2. Top 10 U.S. Exports to Vietnam and Imports from Vietnam
According to U.S. trade statistics for 2009; U.S. $ millions
Top 10 Exports to Vietnam
Top 10 Imports from Vietnam
Product
Value
Product
Value
Vehicles other than railway or tramway
445.968 Articles of apparel and clothing
2,889.913
rolling stock, and parts and accessories
accessories, knitted or crocheted
thereof
Nuclear reactors, boilers, machinery and
368.391 Articles of apparel and clothing
2,118.126
mechanical appliances; parts thereof
accessories, not knitted or crocheted
Iron and steel
236.820 Furniture; bedding, mattresses,
1,387.661
mattress supports, cushions and similar
stuffed furnishings; lamps and lighting
fittings, not elsewhere specified or
included; illuminated sign illuminated
nameplates and the like; prefabricated
buildings
Meat and edible meat offal
221.340 Footwear, gaiters and the like; parts of
1,289.368
such articles
Cotton
171.770 Electrical machinery and equipment
638.497
and parts thereof; sound recorders and
reproducers, television image and
sound recorders and reproducers, and
parts and accessories of such articles
Plastics and articles thereof
150.012 Mineral fuels, mineral oils and products
556.001
of their distillation; bituminous
substances; mineral waxes
Residues and waste from the food
134.180 Fish and crustaceans, molluscs and
523.832
industries; prepared animal feed
other aquatic invertebrates
Electrical machinery and equipment and
124.675 Nuclear reactors, boilers, machinery
384.146
parts thereof; sound recorders and
and mechanical appliances; parts
reproducers, television image and sound
thereof
recorders and reproducers, and parts and
accessories of such articles
Optical, photographic, cinematographic,
111.771 Coffee, tea, maté and spices
322.032
measuring, checking, precision, medical or
surgical instruments and apparatus; parts
and accessories thereof
Wood and articles of wood; wood
107.063 Edible fruit and nuts; peel of citrus fruit
247.451
charcoal
or melons
Source: U.S. International Trade Commission.
Notes: Products categorized by HTS chapters.
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
According to U.S. trade statistics, the top U.S. imports from Vietnam in 2009, besides clothing
and fish, were (in order) furniture and bedding; footwear; electrical machinery; mineral fuel and
oil; machinery; spices, coffee, and tea; and edible fruits and nuts (see Table 2). The top U.S.
exports to Vietnam included (in order) non-railway vehicles, machinery, iron and steel, meat,
cotton, plastic and plastic articles, food waste and animal feed, electrical machinery, optical and
medical equipment, and wood and wooden articles. The juxtaposition of these two lists reveals
product categories that may warrant watching, as well as a connection between some of the top
trade commodities.
Furniture and Bedding
Over the last 10 years, Vietnam has risen from being the 62nd largest source for furniture and
bedding imports for the United States to being the fourth-largest source—surpassing past leaders
such as Italy, Malaysia, and Taiwan. Furniture and bedding provided over 11% of total U.S.
imports from Vietnam in 2009, and it was the second-fastest growth category of imports from
Vietnam (after electrical machinery) since 1998.
Footwear
While most of the focus has been on clothing imports from Vietnam, footwear imports from
Vietnam were over 10% of total imports in 2009. Vietnam was the second-largest source of
footwear imports for the United States in 2009, exceeding Italy, Malaysia, and Taiwan.
Electrical Machinery
Vietnam’s electrical machinery exports to the United States grew more than 1,000-fold over the
last 10 years, reaching over $630 million in 2009 and over 5% of total U.S. imports from
Vietnam. According to interviews with foreign investors in Vietnam, there is great potential for
growth in this sector because of Vietnam’s inexpensive, skilled workers.
Product Interplay
There is also a discernable interplay between Vietnam’s top exports to the United States and the
top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United
States, which is then used to manufacture clothing to be exported to the United States. Similarly,
Vietnam imports wood from the United States that may end up in the furniture that is imported by
the United States from Vietnam. There is also a significant amount of cross-trade in electrical
machinery—a top-10 export item for both countries—as parts and components are shipped back
and forth across the Pacific Ocean. The implication is that efforts to curtail the growth of certain
top exports of Vietnam to the United States could result in a decline in U.S. exports to Vietnam
and possible job losses in the United States.
Trade in Services
The United States perceives a trade advantage in several of the services sectors, especially
financial services. In the latest U.S. National Trade Estimate (NTE), the Office of the U.S. Trade
Representative indicated that as part of the implementation of the BTA, Vietnam has committed
to greater liberalization of a broad array of its services sectors, including financial services,
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U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress
telecommunications, express delivery, distribution services, and certain professions. Vietnam has
already committed to allowing 100% foreign ownership of securities firms and express delivery
service providers by 2012. It is likely that the United States will press Vietnam for more access
during the BTA talks, as well as during the BIT negotiations.
Foreign Direct Investment
In 2009, Vietnam licensed 1,208 foreign direct investment (FDI) projects worth $23.107 billion.61
The leading source of FDI in 2009 was the United States, with 70 projects worth $9.945 billion.
The second- and third-largest sources of FDI in 2008 were the Cayman Islands and South Korea,
respectively. The accumulated value of FDI in Vietnam for the period 1998-2009 is $194.430
billion. South Korea was the leading investor during this period, followed by Taiwan and
Malaysia. The United States was the 5th largest investor, with 589 projects worth $15.403 billion.
Growing U.S. interest in investment opportunities in Vietnam could have an impact on the BIT
negotiations and, by implication, have an effect on the 112th Congress if the negotiations are
completed in 2011. In addition, as more U.S. companies invest in Vietnam, there is the possibility
of more business-to-business disagreements between U.S. and Vietnamese companies, and more
constituent pressure on Congress to address perceived shortcomings in Vietnam’s treatment of
foreign-owned enterprises.
Author Contact Information
Michael F. Martin
Specialist in Asian Affairs
mfmartin@crs.loc.gov, 7-2199
61 Data from the General Statistics Office of Vietnam.
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